The best 529 plans: 5 Cap Ratings Q4 2017
There are over 100 529 plans offered in the United States, resulting in a great deal choice for families. But having so many options can actually make it challenging for the average parent to decide which plan to select. Savingforcollege.com provides an overall rating for each plan to help consumers evaluate and narrow down their choices. Since 2012, the 5-Cap Ratings have offered an independent and objective evaluation of both direct-sold and advisor-sold 529 plans. We are pleased to share the top rated plans from our latest quarterly analysis.
About the 5-Cap Ratings
Each quarter, scores are assigned based on a variety of factors, which we separate into four categories: Performance, Costs, Features, and Reliability. There is also a “Resident Upgrade” score to reflect any additional benefits offered to residents of the plan’s sponsoring state. Ratings for advisor-sold plans assume that the higher cost structure is justified by the professional advice, due diligence and time savings a financial advisor can provide.
How the 5-Cap Ratings work
Each plan’s category scores and the “Resident Upgrade” score are computed on a scale of 1 to 5. We use a weighted averaging algorithm to calculate the overall 5-Cap Rating. Each plan’s category score and overall Rating are featured on its Plan Details page, so that individuals are able to weight each factor, such as historical investment performance, based on their own circumstances and preferences. Separate scores are calculated for residents and non-residents of each sponsoring state, since many states offer special benefits for residents who invest in their 529 plans. Over 30 states, including the District of Columbia, currently offer a state tax credit or deduction for 529 plan contributions. It’s important to note that while we do employ a mathematical formula to calculate these scores, a significant portion of our analysis is subjective, and the Rating does not assess every aspect of a 529 plan, its management, or future investment performance. Click here for more information on how we calculate the Ratings.
Top rated direct-sold 529 plans
Several plans have switched managers, and therefore are unable to obtain ratings yet – including the DC, Illinois Bright Start, Mississippi MACS and North Dakota’s college SAVE plans. Rhode Island’s CollegeBound plan surpassed the one-year mark in terms of performance history and received its first ranking. The standard behemoths obtained double 5- Cap Ratings: California’s ScholarShare, Maine’s NextGen, New York’s 529 College Savings Program, and Ohio’s CollegeAdvantage. Several prepaid plans also received favorable ratings increases in part due to the programs now being overfunded.
Also note that several plans may have seen the “Reliability” component of their score decrease, though there were no changes in the plan. This is because one of the components of Reliability is the risk of plan upheaval, and as the contract expiration data approaches there is greater risk of changes in the plan.
The direct-sold plans listed below currently have a resident and/or non-resident rating of 5-Caps.
|State||Plan||Resident score||Non-resident score|
How to enroll
Top rated advisor-sold 529 plans
One advisor-sold plan stood above the rest, receiving the only double 5-Cap Rating for advisor-sold plans: Illinois’s Bright Directions 529. Michigan’s MI 529 Advisor switched program managers in September 2017 and therefore is unable to obtain a ranking yet. Other notable standout plans can be found below. Also note that several plans may have seen the “Reliability” component of their score decrease, though there were no changes in the plan. This is because one of the components of Reliability is the risk of plan upheaval, and as the contract expiration data approaches there is greater risk of changes in the plan.
The advisor-sold plans listed below currently have a resident and/or non-resident rating of 5-Caps.
|State||Plan||Resident score||Non-resident score||How to enroll|
A good place to start